The facade is crumbling, it is raining through the roof, and the heating costs of last winter have brought tears to your eyes? Clear case: Your house has its best days behind. No reason to order the wrecking ball. Renovation is often worthwhile to bring the building back into shape. You don’t have to pay for it out of pocket. There are three types of credit to choose from:
- A dedicated renovation loan
- A home loan
- A normal, non-earmarked installment loan
In the following we present all three variants with their advantages and disadvantages and show which loan suits real estate owners best.
The renovation loan: easy to get, good conditions
Because the granting of a renovation loan is linked to your existence as a property owner, you receive cheaper interest than with a normal, free installment loan. The following points speak for the restructuring loan:
- The application is easy: you just have to show that you own the property. A cost-causing entry in the land register is not necessary.
- The possible funding amounts start at around 5,000 dollars and end at 50,000 dollars.
- You are free to choose the measures for which you want to use the funds from the restructuring loan. When granting the renovation loan, it does not matter whether the property is still burdened by debts.
By the way: It doesn’t matter whether the loan you are applying for is called a renovation loan or a renovation loan. Each bank uses its own name for this. It is one and the same loan product, namely an earmarked installment loan, which is only intended for property owners.
What should be noted: Some banks define the requirements for renovation loans or renovation loans somewhat more strictly. It may be the case that you not only have to provide a land register extract but also an action plan or cost estimates before approval. In some cases, the institutes want to see invoices afterwards with which you have to prove the use of the money. In return for the stricter rules, you often get even cheaper interest. If you prefer your independence, choose banks that set looser rules for restructuring loans when choosing a bank.
Refurbishment with construction finance
As a property owner, you already had construction finance to buy your own home years ago. Now you want to renovate or renovate your house. So the idea is obvious to simply take out another building loan. After all, interest rates for this are currently unbeatably low.
However, the barriers to entry are all the higher:
- A bank only grants you further mortgage lending if your property is practically debt free. A limit of at least 80 percent often applies here. If this is the case for you, you can take out a second building loan, provided your plans meet the following requirements and have an added value on your property.
- As a rule, only those measures can be implemented via further construction finance that have a value-enhancing effect on the property. Many renovations (eg new wallpaper, new floor coverings) only serve to maintain and maintain the value of a property. However, most of the larger measures, such as new insulation, a new roof or new windows, are often accompanied by structural changes, and this is usually associated with an increase in the value of the property.
Why is the difference between preserving value and increasing value so decisive? Because a bank wants to see collateral in return for every cent it lends you for a home.
- A simple renovation or new furniture has no significant intrinsic value and at most contribute to the value retention of the property. That is why you cannot usually co-finance these things. Assuming that you would need around 20,000 dollars more for furniture, the bank will offer you an extra installment loan. It then equips them with higher interest rates to compensate for the higher risk. However, measures such as renovations are usually considered to add value. The new heating or the new windows increase the value of the house. How much you can co-finance through construction finance depends on the bank. Refurbishment sums from 50,000 dollars upwards are common. However,
If, despite everything, construction financing is an option for your project, you still have to weigh it up: a building loan is cheaper in terms of interest than a renovation loan, but it is also more complex to process. As with the purchase, a land register entry must be made via the notary, which causes additional costs. Our land register calculator shows you what to expect. If you look at these expenses, a special-purpose installment loan is often the better, because uncomplicated, alternative for property owners.
Refurbishment with a normal, non-earmarked installment loan
Last but not least, you also have a free, non-earmarked installment loan. This is the most straightforward option when it comes to application procedures. You do not have to submit a land register statement, and ultimately the bank does not care what you use the money for. As a consequence, you also have to pay the highest interest for a free installment loan compared to a home loan and a dedicated installment loan. From a purely financial point of view, a dedicated installment loan is therefore more worthwhile for property owners.
Refurbishment loans: Find the best easily
Extensive renovation or renovation requires good planning: from the commissioning of an appraiser to the organization of craft businesses and service providers to the application for the appropriate loan. Our installment loan specialists are at your side: in a personal discussion, they clarify which measures you have in mind and find banks that have exactly the right loan for them. The consultants will also accompany you through the entire application process.